Correlation Between Aberdeen and T Rowe

Can any of the company-specific risk be diversified away by investing in both Aberdeen and T Rowe at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aberdeen and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aberdeen Eq Long Short and T Rowe Price, you can compare the effects of market volatilities on Aberdeen and T Rowe and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aberdeen with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen and T Rowe.

Diversification Opportunities for Aberdeen and T Rowe

-0.24

Correlation Coefficient

Aberdeen  T Rowe

Very good diversification

The 3 months correlation between Aberdeen and PATFX is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Eq Long Short and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and Aberdeen is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aberdeen Eq Long Short are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Aberdeen i.e., Aberdeen and T Rowe go up and down completely randomly.

Pair Corralation between Aberdeen and T Rowe

Assuming the 90 days horizon Aberdeen Eq Long Short is expected to generate 128.89 times more return on investment than T Rowe. However, Aberdeen is 128.89 times more volatile than T Rowe Price. It trades about 0.18 of its potential returns per unit of risk. T Rowe Price is currently generating about -0.02 per unit of risk. If you would invest  907.00  in Aberdeen Eq Long Short on December 29, 2024 and sell it today you would earn a total of  2,047  from holding Aberdeen Eq Long Short or generate 225.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.38%
Values	Daily Returns

Aberdeen Eq Long Short  vs.  T Rowe Price

Aberdeen Eq Long

Risk-Adjusted Performance

Good

Over the last 90 days Aberdeen Eq Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Aberdeen showed solid returns over the last few months and may actually be approaching a breakup point.

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aberdeen and T Rowe

The main advantage of trading using opposite Aberdeen and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen position performs unexpectedly, T Rowe can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Aberdeen Eq Long Short and T Rowe Price pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.